Correlation Between Lancaster Colony and Seneca Foods

Can any of the company-specific risk be diversified away by investing in both Lancaster Colony and Seneca Foods at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lancaster Colony and Seneca Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lancaster Colony and Seneca Foods Corp, you can compare the effects of market volatilities on Lancaster Colony and Seneca Foods and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lancaster Colony with a short position of Seneca Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancaster Colony and Seneca Foods.

Diversification Opportunities for Lancaster Colony and Seneca Foods

0.19

Correlation Coefficient

Lancaster Colony  Seneca Foods

Average diversification

The 3 months correlation between Lancaster and Seneca is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Seneca Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seneca Foods Corp and Lancaster Colony is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lancaster Colony are associated (or correlated) with Seneca Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seneca Foods Corp has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Seneca Foods go up and down completely randomly.

Pair Corralation between Lancaster Colony and Seneca Foods

Given the investment horizon of 90 days Lancaster Colony is expected to generate 0.62 times more return on investment than Seneca Foods. However, Lancaster Colony is 1.62 times less risky than Seneca Foods. It trades about 0.17 of its potential returns per unit of risk. Seneca Foods Corp is currently generating about 0.06 per unit of risk. If you would invest  18,068  in Lancaster Colony on August 10, 2024 and sell it today you would earn a total of  1,553  from holding Lancaster Colony or generate 8.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.64%
Values	Daily Returns

Lancaster Colony  vs.  Seneca Foods Corp

Lancaster Colony

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lancaster Colony is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Seneca Foods Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Seneca Foods Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, Seneca Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lancaster Colony and Seneca Foods

The main advantage of trading using opposite Lancaster Colony and Seneca Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancaster Colony position performs unexpectedly, Seneca Foods can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Seneca Foods will offset losses from the drop in Seneca Foods' long position.

The idea behind Lancaster Colony and Seneca Foods Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.